Does Common Agricultural Policy Influence Regional Disparities and Environmental Sustainability in European Union Countries?

This study examines the impact of the European Union’s Common Agricultural Policy (CAP) funds, specifically the European Agricultural Fund for Rural Development (FEADR) and the European Agricultural Guarantee Fund (FEGA), on a range of economic, social, and environmental outcomes across European regions. Utilizing Fully Modified Ordinary Least Squares (FMOLS) estimators, this research analyses 13 equations corresponding to various dependent variables, including employment rates, poverty levels, agricultural productivity, and environmental indicators such as greenhouse gas emissions and renewable energy production from agriculture. This analysis covers the period from 2010 to 2021, and draws upon a balanced sample of 301 observations to ensure robust estimations. Results indicate that both FEADR and FEGA payments significantly influence these regional outcomes, though the effects vary depending on the specific economic or environmental indicator examined. The findings reveal that while FEADR payments positively impact rural employment, agricultural income, and renewable energy production, they are less effective in addressing poverty reduction and productivity enhancement. Conversely, FEGA payments exhibit a stronger influence on agricultural productivity and income, but have mixed effects on environmental sustainability. This study highlights significant regional disparities, suggesting that the allocation of CAP funds is uneven in its impact across regions. The implications for policymakers are clear: a more tailored approach is required to enhance the effectiveness of CAP funds in meeting diverse regional needs, particularly in promoting economic development while minimizing environmental harm. This study also emphasizes the need for further research to explore alternative policy mechanisms and innovative agricultural practices that can bridge the gaps identified in the current CAP framework. Limitations of this study include data availability and the inherent complexity of agricultural systems, which may affect the generalizability of the results across different EU member states.